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Monday Message Board

August 28th, 2017

Another Monday Message Board. Post comments on any topic. Civil discussion and no coarse language please. Side discussions and idees fixes to the sandpits, please.

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  1. August 28th, 2017 at 23:55 | #1

    Latest from Martin Green, Australia’s star solar researcher – both good news and nonsense.

    The good news is that he thinks the solar pv leaning rate is increasing, to 40%. Green has strong links to the industry – he invented the PERC process some years ago, which is becoming the latest standard. The claim has to be taken seriously.

    The nonsense is a claim that Australia’s losses from thermal coal exports will be made up for by the resource requirements of the solar boom, in steel, aluminium and so on.

    “It’s great for Australian resources,” he says. A global surge in solar capacity would lift demand for key Australian exports such as coking coal, iron ore, bauxite, alumina and copper, while the battery storage industry will be good news for miners of lithium, nickel and cobalt and other materials.

    Oh dear. The global energy industry takes $1.7 trn, give or take a few 100 billion, every year to replace worn-out assets and meet rising demand. Whatever method is used will take massive material resources. Oil refineries, pipelines, LNG liquefaction plants and ships, dams, central power stations whether coal, gas or nuclear, transmission grids: all these take huge amounts of steel, cement and other materials. A shift towards solar changes the mix, but absent a detailed input-output analysis like Weidmann’s we can’t know if it would increase the total material input. A priori it won’t, as wind and solar farms are lightweight structures compared to their rivals. Globally, steel is on a declining trend, and pig iron from fresh ore even more so as more scrap from past growth becomes available for cheaper recycling. Aluminium? Copper? You must be joking.

    Green is on better ground in claiming that batteries will call for mining much more lithium and probably nickel and cobalt. If you scale up current lithium demand (35,000 tonnes) by an increase to 100m EVs a year in 2030, you would need 4.7m tonnes a year. That’s with no increase in resource efficiency. Lead, scarcer in the Earth’s crust, is mined at 4.8m tonnes a year. A nice little earner to be sure, but not a replacement for 375m tonnes of doomed Australian coal exports.

    Advert for long new blog post on the electric car revolution.

  2. August 29th, 2017 at 03:04 | #2

    Update on India’s coal policy. The top-level planning commission NITI has released a three-year coal plan that’s a wish list for the domestic coal industry. The state coal mining behemoth Coal India has been given a target of 1 billion tonnes pa in 3 years.

    This planet-busting Stalinism is well beyond Coal India’s capabilities as indicated by its history. It also lies well beyond likely demand. The production target for fiscal 2018 has just been cut from 660mt to 600mt to match the market. Since despatch in 2016-17 was only 543mt, with rising stocks, even that may well be too high. Meanwhile coal generating plants only get an average capacity factor of 55% and the country is littered with abandoned coal generating construction sites, according to Coalswarm.

    What is going on? My reading of Modi is as Lloyd George: highly intelligent, flexible, and unscrupulous. He has let the old-style coal lobby write the latest coal-boosting plan in the knowledge that it will fail. The plan does not call into question the freeze on new coal power stations beyond those under construction (genuinely or nominally), nor the ambitious targets for renewables. There are vague statements about diversifying imports, but nothing to give real comfort to Adani.

  3. Gregory J. McKenzie
    August 29th, 2017 at 14:48 | #3

    Economists only recognize produced goods if they have an effective demand. As for underutilized capital, the productivity of capital is important to growth. Wastage of resources due to both: overproduction; and market distortions; can lead to severe recessions. As for setting production targets, if these targets are unrealistic then labour productivity will also be seen to fall. Cross factor productivity is only optimized when complementary strategies are adopted. To force labour units to work longer hours and still to allow production plants to lie idle, is an an ineffective plan for growth in any industry. Efficiency in economics means least cost production levels. Idle plants and poor work practices lead to inefficient outcomes.

  4. Ronald
    August 29th, 2017 at 18:06 | #4

    Demand for lithium may be much less. 100 million Tesla 3 electric cars may only need around one million tonnes of lithium. But if we are talking about lithium carbonate, rather than elemental lithium, then it becomes closer to 4.7 million tonnes. But if these cars are driving themselves then one car may be doing the work of 10 dropping demand for by 90%. If they are driving themselves then 4 hours endurance or less may be all most require, which only requires a small battery pack, further reducing the need for lithium.

    On the other hand, maybe Indians will develop a taste for lithium powered intercontinental siege machines which they will drive down to beach for an ice cream in the evening. After all, the American whale sized cars with fins never made much sense either.

    And lithium could also have other applications.

  5. August 29th, 2017 at 18:29 | #5

    @Ronald
    Agreed. My 4.7 mt of lithium a year is a best-case for the industry, not a forecast. The real demand will be much less. I started with the incorrect assumption that all current lithium goes into cars: not too bad as static batteries will grow fast too.

  6. Luke Elford
    August 29th, 2017 at 19:00 | #6

    The thinktank CEDA has a new report out, Housing Australia, which is getting plenty of media play. It’s a bit of a mixed bag, with something to validate everyone’s priors, which is unsurprising given CEDA’s “bipartisan” approach. There are some interesting contributions in the report, but overall it’s poor, and merely rehashes the standard fixes—some sensible, some silly—that have already been suggested many times before.

    The following are some comments on some of the issues raised in the report.

    1) Like almost all analyses of the long-run trends in average dwelling prices, the report almost completely obfuscates the role of increased housing consumption—bigger, nicer and better-serviced dwellings. The national accounts, combined with data on inflation and the number of dwellings, show that the real value of the average dwelling structure in Australia has tripled since 1970, partly as a result of increasing real construction costs but mostly because of a doubling in the size/quality of dwellings.

    Real house prices in Hobart, for example, have also tripled in this time, and prices on the Melbourne fringe have increased only a little more. As housing prices in the more central locations of Australia’s major cities have capitalised the growing economic advantages of these places compared to peripheral locations and smaller centres, price gradients have risen and the overall increase in house prices has been faster.

    The greatest housing policy failure has been that households that happened to own housing in the right place and at the right time could enjoy these advantages for free, while everyone else has to pay. This is an inequality that could have easily been ameliorated through land taxation.

    2) The report ignores existing evidence about the prices and costs of new residential development, such as the work commissioned by the National Housing Supply Council in 2011, which debunked the idea that high raw land costs, approval delays, or unusually high profits drove a significant wedge between costs and prices. The only partial exception to this was Sydney. As the RBA noted the clear conclusion from this evidence is that, “while there are no doubt regulatory changes that can be made that would reduce the costs and time involved in housing construction projects, it is questionable whether this would reduce prices by enough to bring home purchase within reach of many additional households. In many cases, the bulk of the cost of a new dwelling is the cost of construction, not the government charges or land”.

    Since 2011, real prices for new residential lots have been roughly constant outside Sydney, and—again with the exception of Sydney—apartment prices have fallen or risen modestly in line with qualitative improvements. In Melbourne, the continued price boom has been about existing houses.

    Except in Sydney and perhaps parts of Melbourne, the idea that reforms could yield additional supply that substantially reduced prices is not supported by the evidence.

    3) Transport and other infrastructure projects need to be judged on the basis of cost-benefit analysis, not promises that they will reduce house prices. Policy should seek to optimise the trade-offs between the advantages we gain from interacting with large numbers of other people (for example, through thick labour markets) and the costs of achieving this through living close to one another (with the attendant higher construction costs of dense development) or travelling further (with the attendant time and private and public monetary costs).

    While additional transport capacity will play an important role facilitating city growth, it shouldn’t be assumed that transport investment can significantly reduce travel times or costs. As I’ve noted before, transport networks get congested up until the point that the benefits from commuting (higher wages than working locally) are offset by the costs.

    4) It’s wrong to think that economic development policies, or infrastructure investments, should favour regional locations to “take the pressure off” bigger cities. Suppose that such a policy were effective in increasing wages in a regional centre and this diverted growth from a big city. Housing costs would rise in the regional centre, so workers would receive only part of the wage increase. Ignoring the endogeneity of wages to city size, workers in the big city would earn a higher real wage as housing costs fell.

    But the same is true if you reverse the roles of the two locations. Whether investment in one location, or another, did the most to benefit workers is indeterminate from theory alone.

  7. Luke Elford
    August 29th, 2017 at 19:01 | #7

    Apologies for the length of the above comment, by the way, but there are no recent ‘Weekend reflections’ posts.

  8. knowteeth
    August 30th, 2017 at 15:10 | #8

    Re: Technology to the Rescue ?
    Can we get to 350 ppm? Yes, we can
    The nuclear renaissance dies, forgotten and bankrupt
    https://www.sciencedaily.com/releases/2017/08/170823121339.htm
    Journal refs down page…
    How 139 countries could be powered by 100 percent wind, water, and solar energy by 2050
    The latest roadmap to a 100 percent renewable energy future outlines infrastructure changes that 139 countries can make to be entirely powered by wind, water, and sunlight by 2050 after electrification of all energy sectors. Such a transition could mean less worldwide energy consumption due to the efficiency of clean, renewable electricity; and a net increase of over 24 million long-term jobs.

  9. derrida derider
    August 31st, 2017 at 15:03 | #9

    Such a [renewables] transition could mean less worldwide energy consumption due to the efficiency of clean, renewable electricity; and a net increase of over 24 million long-term jobs.

    Err, if it takes 24 million extra people to produce less worldwide energy then that is NOT efficient and therefore not cheap. And of course if it was cheap why would you think there would be LESS consumption? This sentence makes no economic sense.

    People on both left and right consistently get this wrong – that some development “creates jobs” is generally a poor argument because making humans work harder for the same output is something to be avoided, not hoped for.

    In fact I think renewables will be cheap and therefore will employ less people in making electricity than are currently employed in it. Yet we will be making more, not less, electricity as a consequence of that cheapness.

  10. Smith
    August 31st, 2017 at 18:12 | #10

    @derrida derider

    You’re such a neoliberal. 🙂

  11. Ronald
    September 1st, 2017 at 15:56 | #11

    @derrida derider ,

    It takes South Australia around 6 megajoules of energy to provide a household with 1 kilowatt-hour of electricity while it takes Victoria around 11 megajoules to do the same.

    Wind and solar power and also electric vehicles are much more efficient than their fossil fuel equivalents.

  12. rog
    September 1st, 2017 at 17:34 | #12

    The event known as Australia Day continues to be decisive.

    NZ has Waitangai Day, a national celebration of the treaty between the first occupiers and the second and the formation of modern day NZ. You would think that this event ticks the necessary boxes but it doesn’t, it remains a day of some controversy.

    As nationalism is associated with the triumph of one group of people over another it might be better to ditch the thing entirely.

  13. rog
    September 1st, 2017 at 17:47 | #13

    Asylum seekers, wearing of the burqa, SSM, legality of the confession and sexual abuse by clergy seem to have a common source; the domination of the white Anglo Saxon (judeo-christian) cohort over others.

    The ABC Religion & Ethics program (God love our ABC) covered the AHRC review into religious freedom..”Christian groups, enjoying their effective establishmentarianism, flooded the AHRC submission process with their vested cases for privilege such that the status quo on religious entitlement prevailed.”

    When it comes to God it’s a dog eat dog world.

    http://www.abc.net.au/religion/articles/2013/08/28/3835955.htm

  14. MartinK
    September 1st, 2017 at 19:35 | #14

    @Ronald

    Ronald :
    @derrida derider ,
    It takes South Australia around 6 megajoules of energy to provide a household with 1 kilowatt-hour of electricity while it takes Victoria around 11 megajoules to do the same.

    That claim is very unclear, I can’t (quite) make sense of it. Can you explain it in more detail? I can see why it is an appropriate reply to Derrida’s own reply, but what those numbers mean is unclear.

    And I am not sure it matters, not directly. I don’t see why a reduction in consumption of renewable energy is a good thing, or a bad thing (that is with a zero corresponding change in non renewable consumption).

  15. Greg McKenzie
    September 3rd, 2017 at 08:27 | #15

    Economically sustainable development debates should acknowledge the social costs and benefits of any opportunity to generate power. The money costs are manageable, some of the social costs are both long run and difficult to manage. Pollution, in its many forms, can undermine the benefits of cheap energy opportunities. Social dislocation can cause both, south term productivity losses, and long term human capital disinvestments. Simply put, it is not just about dollars and cents. Sustainability should be the “acid test” of any opportunity to generate more electricity.

  16. Ronald
    September 3rd, 2017 at 14:15 | #16

    MartinK, generators turn the energy in spinny things into electricity energy with about 90% efficiency. A wind turbine rotor is just a big spinny thing. But to mke something spin, coal first has be be burned, the heat from burning it has to boil water to make steam, and the steam has to make a steam turbine spin. Since a steam turbine is a spinny thing, electricity can be generated from it with about 90% efficiency, the energy is lost in the previous steps so it ends up only being about 33% efficient.

  17. rog
    September 4th, 2017 at 07:38 | #17

    HELE is being promoted as a way to assist in carbon capture (?) but as the fine print indicates, costs are an issue possibly requiring mandatory enforcement to implement, there may be resource constraints on implementing HELE and more funding is needed for R & D.

    In addition the IEA indicate that the difference between 26% and 30% global uptake of HELE by 2020 is the difference between a global temperature rise of 2C and 6C – this seems like a powerful argument against any coal.

    A lot of this HELE stuff seems to be aspirational; the new “clean coal” power generator being built in Kemper County is suffering from spiralling costs (reported as +$4B over the original budget of $2.9B) forcing the dumping of the “clean coal” as an energy source for natural gas.

    https://www.iea.org/publications/freepublications/publication/HELE_Foldout_A3_2ndProofs.pdf

  18. MartinK
    September 4th, 2017 at 17:42 | #18

    @Ronald
    Thanks for your reply Ronald, but the thermal efficiency of a power plant doesn’t make any difference. (Well actually that whole thread doesn’t make any sense starting with Knowtheeth’s claim about the efficiency of renewables leading to a reduction in consumption). I doubt solar farms even convert 20% of solar the energy that falls on them but that doesn’t make any difference either.

  19. Ronald
    September 5th, 2017 at 10:17 | #19

    @MartinK
    Decisions are rarely made based on energy efficiency, so in that sense it doesn’t matter. But it is important to understand why we can dramatically reduce total energy use while increasing living standards.

    The Wikipedia article on primary energy explains what it is:

    https://en.wikipedia.org/wiki/Primary_energy

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